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The XRP Ledger And Graphs: Pattern Detection And Fraud Investigation

The third part in series on how graph databases can be used to explore and analyse the decentralised XRP ledger. This third part focuses on exploring networks of fraudulent accounts and distribution patterns.

Payments on the XRP ledger are pseudo-anonymous, in the sense that everybody can see the amount being sent, what account sent it and what account received it, but not who the owner of the accounts are.

Exchanges and services naturally have to share their account addresses for users to make deposits, so it is quite easy (but a lot of work) to create an overview of “known exchange accounts”. Bithomp has done that, however, and even made a public API to get this information. Also, all users are invited to submit information to extend the list of known addresses, and after thorough verification, it is added to the database.

Side note: In fact, this is a lesser-known place XRP shines, compared to other blockchains. You know, those annoying 20 XRP (the account minimum reserve) that is required to create an account, and that you can never have back unless a vote among the nodes lowers the reserve, it is, in fact, helpful in keeping the ledger pretty clean (along with destination tags). There are far fewer accounts, making reuse of accounts preferable to creating new ones.

Many in the general public mistakenly connect cryptocurrencies and crime, such as money laundering and trafficking. Maybe because of the tainted past, where it has been the choice of payment for illegal trade and ransoms. However, the truth is, that most cryptocurrencies are more traceable and transparent than “normal money” (FIAT), due to the public ledgers.

Through this article, I hope to give you a sense of what this transparency means regarding investigating fraud and financial crime.

Distribution Patterns

A common way to anonymise, or keep a large sum payment “under the radar”, is by splitting up the payment in smaller batches and...

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